Too many TINs, so less return

Illustration: TBS

It is frequently said and numerically established that the amount of Taxpayer Identification Number (TIN) holders is increasing, but the number of submissions of returns is not rising accordingly. According to the National Board of Revenue (NBR), the number of TIN holders was 1,20,89,075 as of April 22, 2024. 

Gradually increasing the number of TINs is certainly a good sign, but on the other hand, the amount of return submissions is equally frustrating. 59% of total TIN holders did not submit a return in the financial year 2023-24.

According to the Registrar of Joint Stock Companies and Firms, the number of registered public and private limited companies till December 2023 was 2.88 lakh. Only 24,381 (8.45%) companies/institutions submitted their returns at the end of the deadline for return submission for fiscal year 2023-24. It means more than 91% of the companies did not file their returns.

A report by NBR shows that around five lakh people do not submit returns as they only needed TIN for transferring land, while around four lakh people availed TINs for specific reasons. 

Over two lakh TIN holders have already passed away, and around three lakh persons collected TIN to migrate abroad for jobs and other purposes. A large number of people collected TIN to get trade licenses, but became dormant afterwards. Moreover, a huge number of companies have turned inactive. 

Many measures have been adopted to increase the number of returns being filed. Proof of submission of return (PSR) has been made mandatory for availing of more than 40 services, but the result is not encouraging. 

Many factors go into it, but to understand the reason behind the accumulation of TINs, a proper look at the origin of TIN is needed.

The Income Tax Act was passed in this subcontinent in 1922. Until 1994, income tax files in circles were identified by their GIR (General Index Register) number. 

Maintained in every circle, GIR was a handmade register containing alphabetically arranged names and serial numbers of taxpayers of that particular circle. 

Those who were officially, personally, professionally, or in any other way connected with income tax activities know that TIN was first introduced in 1995 as a move towards computerisation (words like digitalisation and online were unknown then). 

The National Board of Revenue (NBR) introduced a single-page form in English for both existing and new taxpayers. Existing taxpayers were required to provide their GIR number on the form. New individual taxpayers needed to provide basic information such as their name, father's name, and address. For companies and firms, only the names and addresses were necessary.

The forms were submitted to the relevant tax circles and then sent to the NBR. After computerized verification, which ensured that the applicant did not have another Taxpayer Identification Number (TIN) in any other circle in Bangladesh, a 10-digit TIN was issued. The first three digits represented the circle's location code, the next three indicated when the TIN was issued, and the last four were serial numbers for the files.

For example, 410-000-0000 and 411-000-0000: 410 represented the company circle in Khulna, 411 was for circle-1 in Khulna, and so on across the country based on location. It was impossible to obtain a TIN without submitting an application to the correct tax circle, making this process highly effective.

Seventeen years later, in July 2013, e-TIN was introduced, offering a significant change. The requirement to submit an application at the income tax circles was removed to make the process more public-friendly. 

Now, individuals can easily obtain an e-TIN by simply using their National Identity card (NID) number and a mobile phone number (though phone numbers are no longer mandatory). 

For a company, only the incorporation certificate was sufficient. Collecting a system-generated e-TIN certificate has become very easy. Anyone could file their tax returns from anywhere without having to go to the income tax office. They could do it from their home, office, or even beside a street-corner computer shop. 

As there is no longer a requirement to visit the income tax office, a great number of e-TINs have been generated not just due to necessity but also due to curiosity. These e-TIN holders do not need at all to submit their returns. Unrestricted opportunity to avail of an e-TIN is the main reason for too many TINs.  

In Bangla, there is a proverb that states that cutting the root and watering the top does not provide results. Here the situation is reversed. The root, which is the unhindered opportunity to collect e-TINs, is increasing. But the number of returns being filed, which is the top, is not increasing satisfactorily. Even with strict rules for filing returns and making PSR mandatory, most people will not file returns unless they are compelled.

If this generation of e-TINs cannot be brought under control, the rift between the number of returns filed and the number of TINs will only grow wider. The National Board of Revenue must take effective measures to reduce this shift swiftly. 

Chinmay Prasun Biswas is a former Commissioner of Taxes. 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.